Yuengling fights back over Philly lawsuit

By SPENCER SOPERThe Morning Call

February 10, 2013 12:01 AM

By SPENCER SOPERThe Morning Call

February 10, 2013 12:01 AM

After D.G. Yuengling and Son became the biggest American-owned brewery, the Pottsville company celebrated last year with a "Here's to you, Philly," promotion during which it offered a free serving of its signature lager to bar patrons around Philadelphia.

The company said beer drinkers in the City of Brotherly Love helped revive the popularity of its historic brand, which has become one of the fastest-growing brews in the country.

So it seems fitting that the company's fifth-generation owner, Dick Yuengling, said he was "the happiest guy in the beer business" until he found out the city he chose to celebrate his company's success with has slapped the brewery with a lawsuit seeking more than $6 million.

The lawsuit stems from a disagreement between the city and Yuengling about whether the company has to pay Philadelphia's business income and receipts tax, which is assessed on companies doing business in the city.

Yuengling makes beer at two breweries in Schuylkill County and another in Florida. The beer is sold through a network of wholesalers, distributors and retailers. Yuengling said it has never paid this tax to Philadelphia, and was surprised when it started receiving bills for it several years ago.

News of the lawsuit broke this week and Yuengling has since taken to the airwaves to defend his family's business, which has a positive image in the state as a stable employer providing well-paying jobs in the otherwise economically depressed coal region. The company's distinctions as the biggest American-owned brewery and the oldest brewery in the country are sources of Pennsylvania pride.

"I think they're trying to make an example out of us," Yuengling said in a radio interview with AM 1210 WPHT host Chris Stigall. "I can't believe they tax every pack of gum that comes into the city of Philadelphia."

The city filed a lawsuit Jan. 30 in Philadelphia County Court, alleging that Yuengling owes nearly $4 million in taxes dating to 2008 for beer sales in Philadelphia. In addition to back taxes, the lawsuit seeks nearly $2.7 million in penalties and interest.

David Casinelli, Yuengling's chief operating officer, said Philadelphia began sending the company a bill for the tax several years ago, and the company maintains it doesn't have to pay because its wholesalers, distributors and retailers that own businesses in Philadelphia already pay the tax on Yuengling sales.

However, Philadelphia collects the same tax from other large breweries that produce beer elsewhere and sell it in the city, said Mark McDonald, spokesman for Mayor Michael Nutter. Taxes paid to Philadelphia by similar breweries amount to more than $5 million over several years, McDonald said.

The lawsuit creates a rare public relations dust-up for Yuengling, which has otherwise enjoyed a long run of good publicity. Yuengling is one of the most coveted beer brands in the country. It is sold in 14 states and beer distributors and drinkers from Louisiana, Texas and New England have been clamoring for the company to further expand.

In 2011, it surpassed Samuel Adams-maker Boston Beer to become the largest American-owned brewery. The most popular mega-beer brands sold in the United States, including Budweiser and Coors, are owned by foreign companies.

In 2012, Yuengling sold 2.8 million barrels of beer, up 10.6 percent from the previous year. That amounts to 1.3 percent of the United States beer market and makes Yuengling the country's No. 6 brand, according to Beer Marketer's Insights in Suffern, N.Y., a magazine that tracks the beer industry.

Eric Shepard, editor of Beer Marketer's Insights, said he has not seen a similar public dispute about taxes between a brewer and a municipality in his 35-year career.

"This just looks like bad math and bad politics," Shepard said. "I think the publicity is going to be bad for Philly on this. People like Dick and they like Yuengling. It seems like government overreach."

Yuengling said in his radio interview that the lawsuit stems from government overspending.

"Government has spent more money than they have and they're just coming after everybody to try to tax them to recoup some of the inept spending that they've done," he said. "We'll get through it. We'll get it resolved with Philadelphia."